Transferable Credit

[yenfongmoo]

Is it necessary for a transferring bank A to observe Art 14 upon receipt of discrepant docs from the transferee 's bank B? Would it suffice for A to notify B & advise that docs will be forwarded to the issuing bank for payment?

[T.O.Lee]

As we said in our comments on other queries, if the transferring bank is not ALSO a nominated accepting/paying/ negotiating bank or a confirming bank, then it has no obligation to check doucments. Hence Article 13 & 14 do not concern him.

I am from www.tolee.com

[edited 6/13/01 5:32:14 PM]

[yenfongmoo]

Msg to Mr TO Lee-Thanks for yr advice. Does it mean that the transferring bank A is only required to check docs if it the credit is restricted to A.In the event A is merely the authorised transferring bank in a freely negotiable LC, is it under any obligation to reject docs.No, I have not had the privilege of attending your workshop in Malaysia.
Would you by any chance know where can I obtain more info on Back-to-Back LCs. Thanks once again for your contribution.


[edited 5/29/01 3:06:50 PM]
[edited 5/29/01 3:10:59 PM]

[T.O.Lee]

To answer your question: "Where can I obtain more info on Back-to-Back LCs", besides DC PRO, you may visit my website.

By the way the bank that negotiates the documents in a freely negotiable LC is the one to check the documents and to serve its refusal notice if the documents are discrepant.

If your bank wishes to negotiate, then your bank is to check the documents and to serve your refusal notice, as a negotiating bank rather than as a transferring bank. You must know what hat you are wearing and for the duties to go with a particular "hat".

I am from www.tolee.com


[edited 6/11/01 10:00:12 PM]

[DavidMax]

Hi!
My Bank insist do not accept to transfer L/C if my clients don't put "by negotiation" instead of "payment" on the type of credit available.
Somebody can explain me the difference ?

[T.O.Lee]

We try to provide an answer to Mr. David Max's query: Why his bank refuses to transfer an LC unless it is available for "payment" rather than available for "negotiation" (assuming that negotiation is restricted to the transferring bank).

There are many advantages for such change:

1 The bank may earn negotiation commission and may also earn "commission in lieu of exchange" if LC is in local currency.

2 After advising the LC, the bank may still say "No" to negotiation (unless the bank has given negotiation undertaking before, or after advising the LC).

3 Payment under negotiation (if the LC has not been confirmed) is with recourse.

4 The bank can buy time to wait for the fund coming from the issuing bank or reimbursing bank before making payment to the second beneficiary.

5 In case of trade frauds being committed by the beneficiary or other third parties, the negotiating bank can claim on the issuing bank as a holder in due course, well protected by the Bills of Exchange Act 1882, where the issuing bank has no defence.

If the LC is for payment, then these advantages do not exist.

I am from ww.tolee.com

[edited 2/2/02 7:49:54 PM]

[T.O.Lee]

To answer a further query from Mr. Yenfongmoo of Malaysia, in a freely negotiable and transferable LC, the nominated transferring bank has no duty to examine the documents. It is the obligation of the negotiating bank to examine the documents. If the nominated transferring bank also chooses to negotiate the documents, then, solely as a negotiating bank, it has the duty to examine the documents for compliance.

We hope our answer should be crystal clear to Mr. Yenfongmoo now.

We are from www.tolee.com

[edited 6/14/01 4:21:09 AM]